What will happen to the US economy in 2011? If you're referring to profits of big corporations and Wall Street, next year is likely to be a good one. But if you're referring to average American workers, far from good.
The two American economies -- the Big Money economy and the Average Working Family economy -- will continue to diverge. Corporate profits will continue to rise, as will the stock market. But typical wages will go nowhere, joblessness will remain high, the ranks of the long-term unemployed will continue to rise, the housing recovery will remain stalled, and consumer confidence will sag.
The big disconnect between corporate profits and jobs is likely to continue because America's big businesses are depending less and less on U.S. sales and U.S. workers. Their big profits are coming from two sources: (1) growing sales in China, India, and other fast-growing countries, and (2) slimmed-down US payrolls.
In a typical recovery, profits lead to more hiring. That's because in a typical recovery, American consumers head back to the malls -- and their buying justifies more hires. Not this time. All the hype about Christmas sales over the last few weeks masked the fact that American consumers demanded bargain-basement prices. And the price-cutting dramatically reduced sellers' margins. In short, profits aren't coming from American consumers -- and profits won't be coming from American consumers in 2011.
Most Americans don't have the dough. They're still deep in debt, can't borrow against their homes, and have to start saving for retirement.
The Dow Jones Industrial Average is rising because of foreign sales. General Motors is now making more cars in China than in the US, and two-thirds of its total sales are coming from abroad. When it went public last month it boasted that soon almost half its cars will be made around the world where labor is less than $15 an hour.
Walmart isn't doing especially well in America but Walmart International is booming. And Walmart is hiring like mad outside the US.
General Electric is keeping its payrolls down in the US but plans to invest half a billion dollars in Brazil and hire 1,000 Brazilians, and invest $2 billion in China.
Corporate America is in a V-shaped recovery. That's great news for investors and everyone whose savings are mainly in stocks and bonds. It's also great news for executives and Wall Street traders, whose pay is linked to stock prices. All can expect a banner 2011.
But most American workers are trapped in an L-shaped recovery. That's bad news for the Main Streets and small businesses in 2011. It's also a bad omen for home prices and sales, and everyone whose savings are mainly in their homes.
Home prices in major metropolitan areas sank last month, the third straight month-to-month drop. I expect home price declines to continue next year. We're in a double-dip housing market, largely because unemployment remains so bad that millions of Americans can't pay their mortgages.
None of this bodes well for US employment next year. I expect the official unemployment rate to remain around 9 percent.
In other words, whether 2011 is a great year economically depends which economy you're in - the one that's rising with the profits of big business and Wall Street, or the one that will continue to struggle with few jobs and lousy wages.
Sadly, the next Congress is unlikely to do much to reverse any of this. Most Republicans and too many Democrats are dependent on corporate America and Wall Street. Their version of tax reform is to cut taxes on the wealthy and on big corporations, and either raise them on everyone else (sale and property taxes are already on the rise) or cut spending on programs working families depend on.
At some point, perhaps, the disconnect between America's two economies will become so big and so obvious it can no longer be ignored. Progressives, enlightened Tea Partiers, Independents, organized labor, minorities, and the young form a new progressive movement designed to reconnect America.
One can always hope.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
If any of you are writing to Governor Beshear of Kentucky about the life-sized Noah's Ark the state will be underwriting, don't wait for a reply — he's sending out a standardized form letter, which many people have been forwarding to me. Here it is, in case you haven't got one.
Thank you for contacting me with your concerns about proposed "Ark Encounter" tourist attraction. I appreciate knowing your views.
Bringing new jobs to Kentucky is my top priority, and I believe this project will be beneficial to our future, providing an estimated 900 jobs and $250 million in annual revenue for the regional economy. The theme park is expected to draw 1.6 million visitors in the first year alone. I am excited to have another unique, family-friendly tourist attraction for the state.
The theme park will be funded by private developers at a cost of $150 million. The for-profit developers are seeking state tax incentives under the Kentucky Tourism Development Act - the same program used to help bring the state's first NASCAR race to the Kentucky Speedway. Any tax incentives the project may receive will come in the form of sales tax exemptions once the project is completed, and as long as it meets the guidelines under the Development Act.
The state has reviewed the project from a legal standpoint and, if the Noah's Ark application meets our laws, finds nothing unconstitutional about a for-profit company investing $150 million in Kentucky to create jobs and bring tourism to our state. The tax incentive law does not discriminate among religions and was not created specifically to benefit the theme park. The Tourism Cabinet also is in the process of reviewing the park's application for tax incentives to make sure the project can deliver on certain performance measures. This project is an investment in the future of the Commonwealth and is sure to bring people from across the country to Kentucky.
Again, thank you for sharing your views. As always, please feel free to contact me in the future whenever an issue is important to you.
Sincerely,
Steven L. Beshear
I feel like I've been slimed reading that.
First of all, it's not about jobs, and he knows it. That "900 job" estimate is, as near as anyone can tell, a fiction from a feasibility study cobbled together by one of Ken Ham's cronies, and which no one else has actually seen. The state will be coughing up more money than they're telling us, too: AiG is already asking for road expansion. What else can we expect them to ask for?
It's never just about jobs. If it were, the state would be expanding investment in education and would be taxing the churches. There are always other motives behind exactly what the state government will and will not support.
Come on. This project the governor is supporting only reinforces the stereotype of Kentucky as a state full of ignorant hillbillies and gullible rednecks, making the place a laughing stock. Seriously. Fred Flintstone-style dioramas and exhibits of people working with dinosaurs? Dragons, unicorns, and the Loch Ness monster touted as evidence for the Bible? The whole notion of the Ark itself is ludicrous and untenable…and Beshear is simply dismissing reason and evidence to promote superstition and folly in his state. Because it will part the rubes from their cash. That's cynical and contemptible.
If the governor were sincere in his desire to invest in the future of the state, he wouldn't be supporting miseducation and lies and a low-class, rinky-tink gang of pseudoscientific poseurs and bible-thumping con artists.
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